STUDENT SOLUTIONS MANUAL

Jeffrey M. Wooldridge

Introductory Econometrics: A Modern Approach, 4e

CONTENTS
Preface

iv

Chapter 1

Introduction

Chapter 2

The Simple Regression Model

Chapter 3

Multiple Regression Analysis: Estimation

Chapter 4

Multiple Regression Analysis: Inference

17

Chapter 5

Multiple Regression Analysis: OLS Asymptotics

24

Chapter 6

Multiple Regression Analysis: Further Issues

27

Chapter 7

Multiple Regression Analysis With Qualitative

Information: Binary (or Dummy) Variables

34

Chapter 8

Heteroskedasticity

42

Chapter 9

More on Specification and Data Problems

47

Chapter 10

Basic Regression Analysis With Time Series Data

52

Chapter 11

Further Issues in Using OLS With Time Series Data

58

Chapter 12

Serial Correlation and Heteroskedasticity in

Time Series Regressions

65

Chapter 13

Pooling Cross Sections Across Time. Simple

Panel Data Methods

71

Chapter 14

Advanced Panel Data Methods

78

Chapter 15

Instrumental Variables Estimation and Two Stage

Least Squares

85

Chapter 16

Simultaneous Equations Models

92

Chapter 17

Limited Dependent Variable Models and Sample

Selection Corrections

99

Chapter 18

Advanced Time Series Topics

110

ii
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be
resold, copied, or distributed without the prior consent of the publisher.

Appendix A

Basic Mathematical Tools

117

Appendix B

Fundamentals of Probability

119

Appendix C

Fundamentals of Mathematical Statistics

120

Appendix D

Summary of Matrix Algebra

122

Appendix E

The Linear Regression Model in Matrix Form

123

iii
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be
resold, copied, or distributed without the prior consent of the publisher.

PREFACE
This manual contains solutions to the odd-numbered problems and computer exercises in
Introductory Econometrics: A Modern Approach, 4e. Hopefully, you will find that the
solutions are detailed enough to act as a study supplement to the text. Rather than just
presenting the final answer, I usually provide detailed steps, emphasizing where the
chapter material is used in solving the problems.
Some of the answers given here are subjective, and you or your instructor may have
perfectly acceptable alternative answers or opinions.
I obtained the solutions to the computer exercises using Stata, starting with version 4.0
and ending with version 9.0. Nevertheless, almost all of the estimation methods covered
in the text have been standardized, and different econometrics or statistical packages
should give the same answers to the reported degree of accuracy. There can be
differences when applying more advanced techniques, as conventions sometimes differ
on how to choose or estimate auxiliary parameters. (Examples include
heteroskedasticity-robust standard errors, estimates of a random effects model, and
corrections for sample selection bias.) Any differences in estimates or test statistics
should be practically unimportant, provided you are using a reasonably large sample size.
While I have endeavored to make the solutions free of mistakes, some errors may have
crept in. I would appreciate hearing from students who find mistakes. I will keep a list
of any notable errors on the Web site for the book, www.international.cengage.com. I
would also like to hear from students who have suggestions for improving either the
solutions or the problems themselves. I can be reached via e-mail at wooldri1@.msu.edu.
I hope that you find this solutions manual helpful when used in conjunction with the text.
I look forward to hearing from you.
Jeffrey M. Wooldridge
Department of Economics
Michigan State University
110 Marshall-Adams Hall
East Lansing, MI 48824-1038

iv
This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be
resold, copied, or distributed without the prior consent of the publisher.